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The PEG ratio is the price/earnings to growth ratio of a stock, i.e., the stock’s price-to-earnings (P/E) ratio divided by the growth rate of its earnings for a certain time period. The PEG ratio is typically used to determine a stock’s value; because it factors in the company’s earnings growth, it is considered to be more accurate than the P/E ratio alone.
The lower the PEG ratio, the more likely the stock is undervalued given its current earnings growth. A general rule is that a PEG ratio below 1 is a good buy.

Growth rates used to calculate PEG ratios will affect the accuracy. If historical growth rates are used but future growth rates are expected to be very different, this will skew the reliability of the PEG ratio. PEG ratios may be calculated on expected future growth rates instead of past performance. The terms “forward PEG” and “trailing PEG” are used to distinguish the two. We always use forward PEG ratios, and almost always buy only stocks with a PEG ratio of 1 or under.

The price/earnings (P/E) ratio for a company is the ratio measuring its share price versus its per-share earnings. The calculation is market value per share / earnings per share. Earnings per share is most often based on the previous four quarters (trailing P/E), though sometimes it may be calculated based on expected earnings over the next four quarters (projected or forward P/E).
An ETF is an exchange traded fund that investors buy shares in. It acts like an index fund in that it tracks a commodity or bonds or a collection of assets. Unlike mutual funds, an ETF trades in the same manner as a regular stock, and will experience price gains and losses throughout a trading day. ETFs often offer higher liquidity and much lower fees than mutual funds, which makes them ideal for individual investors. ETFs also sometimes offer dividends. We only select ETFs that are best-in-class with proven track records.
A short, or short position, is a strategy used when an investor thinks a stock is likely to lose value. The investor borrows stock at a certain interest rate, then sells the shares on the open market at their current (overvalued) market price. The investor now owns the cash he received from selling the stock, but owes the stock back to the brokerage he borrowed it from, plus interest. When the stock price drops, the investor buys back those shares and returns them to the broker with interest, creating a net gain. However, if the stock price increases during this time, the investor will take a loss when he buys back the stock to return to the broker.

We use a measurement of existing shorts to analyze the desirability of a given stock. The more shorts there are, the more likely that stock is currently overvalued.

Beta is a measure of the volatility of a security or portfolio compared to the current stability of the market as a whole. Beta signifies the tendency of a security’s returns to rise or fall in response to the market. The lower the beta coefficient, the less likely a security is to swing with the market – it can be expected to underperform in up markets and outperform in down markets.
A trailing stop works for both selling and buying. A sell trailing stop sets the sell order price (stop price) at a certain amount below the market price with a given trail amount set in percentage or dollar amount. As the market price of the stock rises, the stop price rises by the trail amount. If the stock price falls, the stop price doesn’t change, and the stock is sold when the stop price is set.
For example, you buy a stock at $100. The stock falls to a price of $87.49 (which is right below the 12.5% trailing stop level we use as a benchmark). The trailing stop would kick in and automatically sell the stock at $87.49, preventing further loss in that stock. We would keep those proceeds in cash until we decide to buy something else with that cash.
We use trailing stops for certain stocks to take emotion out of sell decisions, and allow us to minimize downside risk.
Historical overview of stock markets show that certain months (typically May, June and July) are times when the market pulls back, creating the ideal condition to get bullish and buy. Conversely, late November and December is when most market gains occur, making these the times to sell and reap profits.
A put or put option is a contract giving the holder the right – but not the obligation – to sell a certain amount of an asset at a specified price (the strike price) within a specified timeframe. As the price of the asset decreases relative to the strike price, the put option grows in value. Oppositely, a put option loses value as the asset increases in price and the expiration date nears.

Puts are another way we protect against downside risk. If the price of an asset depreciates below the value of the put, then the owner has the right to sell the asset – thus the owner can guarantee that they will receive the strike price dictated in the put option even if the asset declines well below that value.

A call or call option is a contact that gives the holder the right – but not the obligation – to buy a certain amount of an asset at a specified price (the strike price) within a specified timeframe. The holder pays a premium for the buy right. As the price of the asset increases relative to the strike price, the call option’s value increases. Conversely, a call option loses value as the asset decreases in price relative to the strike price. Call options are one way to redistribute portfolio allocations without actually selling an asset.
A covered call is a strategy to earn income from an asset held in a portfolio. The investor sells call options on that asset, and earns a premium on the sale (see “what is a call?”). If the call option is exercised by the buyer, then the investor must sell the asset at the agreed-upon price, regardless of its current valuation. However, since the investor already owns this asset, their obligation is “covered.”
We have our own proprietary method for overweighting and underweighting sectors. A sector that we believe is very attractive is overweighted in our portfolio by 10% to 15%. Conversely, a sector that we believe is average or unattractive is underweighted by 10%, or simply not part of the portfolio at any given time. We do try and spread our portfolio over as many sectors as possible to achieve proper diversification. These sectors (and related industries) include but are not limited to: Information Technology, Financials, Health Care, Consumer Discretionary, Consumer Staples, Industrials, Energy, Utilities, Materials and Telecommunications Services.
We use over a dozen tools and metrics to select our assets and allocations. Read our investment methodology.
A portfolio overview is distributed on the 1st of every month. You’ll receive it via email and also by text if you choose that option. We will also send out action items notices throughout the month with time-sensitive buy/sell recommendations based on evolving market conditions.
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Our Investment Performance

Spectacular Performance in a Matter of Months

Our returns since inception date of June 14, 2016 to September 30, 2017, were 26.24%.

Our Beta and Our Methodology

Our methodology is geared to create a portfolio with less risk at any given time than the overall S&P 500.

We Aren’t Afraid to Have a Cash Position

We aren’t afraid to sell our positions when there’s profits to make, plus our covered calls with varying expiration periods and premiums influx additional income.

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